Message from the President and CEO

As the first step in achieving its Long-Term Vision, “DAICEL VISION 4.0,” the Daicel Group has been working on its previous Mid-Term Management Strategy “Accelerate 2025.” Under the previous Mid-Term Management Strategy, we steadily implemented structural reforms aimed at future growth by pursuing business “selection and concentration” through portfolio management, integrating operations with Polyplastics, moving forward with the evolution of DAICEL Production Innovation, and reforming our supply chain. As a result, structural reform has progressed to approximately 70% completion, and we have already moved forward with the groundwork for future growth. We will also steadily implement the remaining reforms under the new Mid-Term Management Strategy, “Accelerate 2030”, which was launched in FY2027/3.

Meanwhile, issues requiring attention emerged, and in FY2026/3, which is the final year of the previous Mid-Term Management Strategy, we did not achieve the initial numerical targets. In particular, the carbon monoxide plant experienced issues stemming from changes in feedstock coal, which impacted earnings. We will complete the strengthening of the foundation for stable operations by FY2027/3, thereby stabilizing our revenue base. Regarding the second cyclic olefin copolymer (COC) plant, we have recorded an impairment loss in light of the delay in demand growth and soaring construction costs. Management is taking this matter very seriously. As we anticipate structural demand growth for COC in the medical and eco-friendly packaging sectors, we will continue with construction, aiming to commence operations during FY2028/3 and ensuring this will lead to future growth.

The new Mid-Term Management Strategy focuses on converting the results of past initiatives into revenue growth. We aim to achieve a balance between stable earnings and future growth by strengthening the cash generation capabilities of our foundation businesses and strategically allocating management resources to growth drivers and next-generation businesses. Furthermore, amidst increasingly significant changes in the external environment, we will build a corporate structure capable of responding flexibly to change by evolving our manufacturing capabilities, grounded in further structural reform, improved capital efficiency, and production innovation. In addition, we view market changes as opportunities for growth; for the expanding semiconductor and AI-related markets, we are introducing products such as semiconductor materials and high-performance resins for AI servers, thereby firmly capturing demand.

While keeping FY2031/3 in view, we have designated FY2029/3 as a key milestone, as it is a timeframe within which we can commit to implementation with accountability despite the highly uncertain environment. We will first focus on achieving our FY2029/3 targets by enhancing our ability to execute specific measures, thereby simultaneously boosting profitability, capital efficiency, and growth.

Guided by our Basic Philosophy of “The company making lives better by co-creating value”, and with a Long-Term Vision of contributing to building a circular society, our Group is dedicated to generating unique value in the areas of health, safety and security, convenience and comfort, and the environment.

Our strengths lie in the expertise cultivated since our founding as a maker of celluloid, specifically in cellulose chemistry, organic chemistry, and high-polymer chemistry—and in a unique technological foundation exemplified by ONE TIME ENERGY®, a technology evolved from cellulose nitrate. Leveraging these technologies, we are delivering value that addresses societal challenges across diverse business areas—ranging from the acetyl chain (centered on acetic acid) and engineering plastics based on high-polymer chemistry to automotive airbag inflators, Pyro-Fuse, and needleless syringes utilizing ONE TIME ENERGY®.

The source of our competitiveness—enabling us to reliably translate these technologies into societal value—lies in our ability to evolve our manufacturing capabilities. For many years, we have been refining the DAICEL Production Innovation approach, which involves visualizing the know-how of skilled operators and incorporating it into operation support systems. Furthermore, by implementing Autonomous Production System evolved through the use of AI, we are elevating safety, quality, and productivity to an even higher level.

In addition, we aim to extend the DAICEL Production Innovation beyond the confines of individual factories and companies to the entire supply chain, thereby optimizing manufacturing and creating new value. Under the new Mid-Term Management Strategy, we will first proceed with operational optimization in the acetyl chain at the Aboshi, Ohtake, and Toyama Filter Tow Plants. Through this, we will achieve end-to-end optimization, from raw materials to finished products, and evolve toward value co-creation that transcends the boundaries of the Group.

Furthermore, the DAICEL Production Innovation goes beyond merely upgrading existing processes; it also serves as a starting point for generating the next wave of process innovation. Thorough efforts toward improvement bring into sharp relief the structural challenges facing the chemical industry, such as its reliance on heavy, large-scale, and energy-intensive plants and greenhouse gas emissions. Our Company is promoting the Biomass Value Chain Concept as an initiative to face these issues head-on and contribute to the realization of a circular society by solving them.

To achieve this, we are working on developing technology to dissolve wood under mild conditions and create low-GHG materials centered on cellulose. Simultaneously, we are advancing the development of a microfluidic device—aiming to shift away from conventional, massive chemical plants—and Ultra Solar-reduction using nanodiamonds to reduce CO2 to CO for use as a raw material. These are innovative technologies that make it possible to balance ecology and the economy.

We cannot achieve these initiatives on our own. We will advance the development of innovative technology through co-creation with universities and partner companies and steadily implement these initiatives under our new Mid-Term Management Strategy, moving forward with a view toward societal implementation from FY2031/3 onwards.

By combining these technological foundations, manufacturing capabilities, and the power of co-creation, our Group will continue to generate unique solutions that deeply address the challenges faced by society and our customers. This is the very source of the Daicel Group’s sustainable growth.

We aim to be a company that goes beyond merely creating superior technologies and materials; we strive to leverage them to solve challenges faced by society and our customers, thereby creating new value. To achieve this, we will also evolve our approach to R&D.

Our R&D has consistently focused on creating value from a customer-centric perspective. However, generating good technology does not necessarily lead to the sustainable enhancement of corporate value. Going forward, we will advance research and development from both technology-driven and business-driven perspectives, aiming to create technologies that support business growth while taking market needs and business viability into account.

To this end, we are adopting a “roadmap-style” approach, in which we define themes by arranging industry technology trends, business strategies, and market-launch milestones along a single timeline. We will take a steady approach to converting research outcomes into business revenue by keeping business integration in mind from the exploratory stage and achieving social implementation at the moment the market demands it.

Furthermore, to balance short-term revenue generation with the securing of future growth opportunities, we manage our R&D themes based on a framework of 30% short-to-medium-term projects, 20% exploratory research, and 50% long-term themes, thereby creating a portfolio that balances immediate needs with growth for FY2031/3 and beyond. In addition, we centrally manage initiatives under a Company-wide committee and a stage-gate system, prioritizing the allocation of limited management resources to growth areas.

Particularly for short-to-medium-term projects, R&D, production, engineering, and business divisions work as one to drive the entire process—from initial exploration to commercialization—in a seamless, end-to-end manner. This enables the R&D department to move beyond mere technical realization and heighten its awareness of approaching projects with a focus on business viability and profitability, thereby linking research outcomes to business results. We will also collaborate with external partners to accelerate commercialization and increase its likelihood of success.

By evolving R&D from a venue for technology development into a starting point for business development, we will accelerate our transformation from a materials supplier into a value co-creation company. Furthermore, while pursuing the achievement of our business goals, we will leverage the “positive, unexpected” outcomes that emerge along the way into new growth opportunities, thereby realizing the enhancement of corporate value over the medium to long term.

In addition to the production technologies, cost-reduction methods, technical services, and marketing capabilities that we have cultivated over many years, our Group possesses a corporate culture of steadfastly confronting challenges and seeing tasks through to completion once a goal is set. These strengths serve as a vital foundation for our Group’s sustainable growth, even in an era of rapid change.

On the other hand, work methods and rules should not be adhered to simply because they have been in place for a long time. To respond to changes in the market and business environment, it is necessary to shift to the most effective approach in light of our objectives. We do not simply proceed with investment decisions once they have been made, but rather continuously review them in light of profitability and changes in the business environment.

Furthermore, it is crucial not to just respond to risks after they occur, but rather to detect early signs and take proactive measures. We will clearly define the roles of each area—foundation, growth drivers, next-generation, and reform—and allocate management resources with a strategic focus.

At the same time, there are things that we must never change, no matter how much the times may change. These are our Basic Philosophy of “the company making lives better by co-creating value,” our stance of prioritizing safety, quality, and compliance above all else, and the distinctive Daicel-style technology and manufacturing capabilities we have cultivated over more than a century.

It is our people who support all these things. The “people-centered management” that our Group has long cherished is a philosophy of linking the growth and challenges of each individual to the growth of the Company. Organizations are supported by people. It is people who execute strategies and technologies and transform them into value. Building on this approach, we will work to strengthen the leadership talent that will drive our next phase of growth.

Strengthening leadership is key to driving transformation. An organization cannot fully realize its potential if management merely sets the policy or if frontline staff simply act independently. It is crucial for leaders positioned between management and the front lines to understand policies and strategies, communicate them in their own words, and translate them into concrete actions on the ground.

Leaders are able to spot signs of change precisely because they are close to the front lines. They swiftly capture customer feedback and changes in the market environment, communicate a sense of urgency within the company, and translate these insights into necessary recommendations and decisions. Cultivating such highly perceptive leaders is essential for organizations moving forward.

We are advancing the appointment and promotion of talent by both leveraging senior personnel and promoting young talent, and we also encourage mid-level leaders to participate in discussions at the executive management level. I believe that increasing opportunities for gaining experience will certainly enhance the adaptability and speed of our leaders.

Business does not always proceed according to the textbook. In an era of uncertainty, we are building an organization where leaders think and act for themselves—valuing not only logic but also the instincts and intuition gained on the ground to grasp changes as they unfold. Furthermore, I believe that “Operation-III” (OP-III)—an initiative outlined in our Long-Term Vision to enhance value across the entire supply chain by expanding horizontal collaboration alongside vertical integration—will also be brought to fruition through the capabilities of these leaders.

We also strictly adhere to the principle of “Bad News First & Fast.” We promptly share minor irregularities or signs of risk with management, ensuring that negative information is grasped early to facilitate swift decision-making. We are working on building an organization of that nature. Information regarding issues, risks, and challenges is now surfacing more quickly than before; I view this as a necessary change and a sign that the organization has begun to function in a sound and healthy manner.

As a company positioned in the middle of the supply chain, we aim to enhance the value of the entire chain by building relationships of equality with both upstream and downstream partners and combining the value each brings.

To realize the “co-creation of value” set forth in our Basic Philosophy, we need leaders who can engage in candid dialogue across boundaries and enhance value by involving stakeholders, as well as an organizational culture that fosters open communication. We will cultivate people, transform the organization, and enhance our capacity to execute change.

Our Group places importance on EBITDA, ROE, ROIC, and DOE as key management indicators. In the financial results for FY2026/3, ROE declined due to factors such as the recording of impairment losses. Behind this lies the fact that the investment projects did not progress according to the initial plan. We recognize this as a critical management issue.

Going forward, we will continuously review our investment recovery plan in response to changes in the business environment and promptly implement necessary recovery measures. We will enhance the quality of our investments by strengthening risk assessments before investment, bringing projects to the Board of Directors from an early stage, and rigorously evaluating business plans and risk assumptions while taking into account the objective opinions of Outside Directors, and amending plans as necessary.

To underpin these investment decisions, we are clearly separating the roles of the Board of Directors and the executive management. While the Board of Directors focuses on important management decisions and oversight from the perspective of increasing corporate value over the medium to long term, we have established a system in which the executive management is responsible for agile business operations and performance. Building upon this highly effective governance framework, we will take a steady approach in implementing measures to enhance capital efficiency.

At the same time, we will significantly reduce days sales in inventory as we move toward a “super asset-light” model. We will achieve further improvements in capital efficiency through measures such as item consolidation, local production and consumption, lead time reduction, PSI management upgrading, and optimization of production planning using AI.

Under the new Mid-Term Management Strategy, we aim to achieve an ROE of 15% or higher, an ROIC of 10% or higher, and EBITDA of 170 billion yen or more by FY2031/3. We also aim for a DOE of 5% or higher and a total return ratio of 60% or higher, seeking to balance growth investment with shareholder returns. While investing for growth, we will transform into a corporate entity that rigorously evaluates investment outcomes and continuously enhances capital efficiency.

Amidst significant changes in markets, technology, and societal needs, we view these shifts as opportunities for growth and are actively accelerating our own transformation. We are transforming our organizational structure; instead of functions such as sales, R&D, technical services, and production operating in isolation as in the past, we are integrating across these functions to work as one, identifying challenges and developing solutions together with our customers. We aim to be a company that does more than simply supply materials—one that engages deeply with the challenges facing society and our customers, inspiring them to want to work with us to solve those issues.

Furthermore, we will achieve sustainable growth in corporate value by creating new value through dialogue and co-creation with our stakeholders, and by evolving into a manufacturing company that solves challenges. To that end, we will see the remaining reforms through to completion, translate their results into earnings growth, enhance capital efficiency, and drive transformation through the power of our people and organization. We will transform change itself into a source of competitiveness and drive the Daicel Group’s next phase of growth.